Foreign control in the Canadian economy

Foreign-controlled assets rose by only 2.1% in 2003, marking the slowest growth by foreign-controlled corporations in more than a decade. Contributing to this slowdown in growth was the dramatic recovery of the Canadian dollar in 2003, which made Canadian assets more costly to buy. However, foreign-controlled assets still managed to top the $1 trillion mark for the first time in 2003.

Foreign-controlled corporations held $1 trillion worth of assets in 2003, which represents 22.3% of the total corporate assets held in Canada. This is down slightly from the year before, when foreign-controlled corporations held 22.7% of total corporate assets.

From 1998 to 2003, growth in assets has been similar for Canadian-controlled and foreign-controlled corporations. Canadian-controlled corporations registered a 39.0% increase in assets since 1998, while the increase for foreign-controlled corporations was 36.2%.

Foreign-controlled revenues grew 3.8% to $743 billion in 2003, edging out Canadian-controlled corporations which grew 3.0%. As a result, the share of operating revenue under foreign control stood at 29.6% in 2003, similar to what it was the year before. Foreign control, as measured by operating revenues, has hovered around the 30% mark since 1995.

United States share of foreign control appears to have peaked

The United States continues to be the largest foreign player in the Canadian economy, although its share of foreign control appears to have peaked by the beginning of the new millennium.

As Canada's largest trading partner, the United States accounted for 62.3% of the assets and 64.1% of the operating revenues generated by foreign-controlled corporations active in Canada in 2003.

The US share of foreign control in Canada has risen steadily throughout the 1990s as cross-border activity increased with the introduction of the free trade agreements between Canada and the United States.

Foreign share of assets on the rise again in the non-financial sector

Foreign control continued to rise in the non-financial sector. Foreign-controlled corporations held 29.3% of total assets in this sector in 2003, up from 28.7% in 2002.

The share of assets under foreign control has been steadily increasing in the non-financial sector since the mid-1980s, when it stood at about 23%.

Foreign control continued to be highest in the manufacturing and oil and gas industries. Manufacturing had just over half (51.3%) of its assets, or $316 billion, held by foreign-controlled corporations. Similarly, oil and gas had 49.1% of its assets, or $123 billion, under foreign control in 2003.

Foreign share of assets in decline in the financial sector

The foreign share of assets has been declining in the financial sector. It stood at 15.0% in 2003, down from 18.5% in 1999. The main contributors to this decline were merger and acquisition activity in this sector coupled with the conversion of some mutual companies into shareholder-owned companies in the insurance industry.

While the United States continues to be the dominant player, the European Union has increased its presence in the financial sector. In 2002, the United States generated 56.3% of foreign-controlled revenue compared to 37.4% for the European Union. By 2003, the European Union was challenging the United States for the lead as the US share shrank to 48.8% of foreign-controlled revenue, while the EU share rose to 46.8%.

Profits rose despite negative shocks

Corporate profits surged to $187 billion in 2003, among the highest earned in a single year, despite it being a very turbulent year. SARS, the power outage in Ontario, mad cow disease in Alberta and raging forest fires in British Columbia did little to dampen corporate profits as foreign-controlled profits rose 8.2% to $53 billion and Canadian-controlled profits rose 10.7% to $135 billion in 2003.

Most of the rise in foreign-controlled profits came on the strength of the near-record profits posted by the oil and gas industry. Profits earned by foreign-controlled corporations operating in this sector jumped by almost 50% in 2003 to $10 billion. Much of this gain can be attributed to the rise in crude oil prices early in the year.

Available on CANSIM: table 179-0004.

Definitions, data sources and methods: survey number 2503.

The report Corporations Returns Act: Foreign Control in the Canadian Economy, 2003 (61-220-XIE, $32) is now available.

For more information, or to enquire about the concepts, methods or data quality of this release, contact David Sabourin (613-951-3735) or Karine Liu (613-951-2468), Industrial Organization and Finance Division.